When Simon Mawhinney of Allan Gray looks at the energy landscape today, he’s reminded of where the gold market was in 2013 before that sector’s dream run. Prices were unsustainably low, and the industry overall was losing money. That made it the perfect time to buy producers capable of riding out the storm, the same opportunity in front of oil investors today.
While he’s not attempting to predict the turning point, he believes that it is impossible to sustain an ecosystem with oil prices at their current levels.
“Many of these companies are running on the mother of all hamster wheels and in fact going backwards, eating into their capital to produce oil. Sooner or later that has to end.”
In this interview, Simon expands on why the supply/demand equation will remedy itself taking into account the OPEC rift, and shares one oil stock offering excellent value.
Contrarian investing is not for everyone, however there can be rewards for the patient investor who embraces Allan Gray’s approach. To stay up to date with our latest thinking, hit the follow button below or contact us for further information.
Past performance is not a reliable indicator of future results. The value of investments in the Allan Gray Australia Funds may fluctuate and when making an investment in the Funds, an investor’s capital is at risk. It is therefore important that you understand the risks involved before investing. This publication represents Allan Gray's view at the point of filming on 11 March 2020 which may have subsequently changed as facts or circumstances change. This publication is not personal financial product, tax, legal, or investment advice, and does not take into account the specific investment objectives, financial situation or individual needs of any particular person. This publication does not prohibit the Allan Gray Australia Funds from dealing in the securities mentioned before or after publication.